Agribusiness management
18 June 2024Interview with Paolo Palomba. Managing Partner of Expertise on Field, a marketing company working in Italy and around the world with FMCG marketing experts in 30 countries on new product development, internationalization, training, and learning by doing. Paolo is a partner of IPLC – The Retailer Brand Specialists international company that works to support agribusiness companies to enter and grow in new markets and distribution channels.
At BBS, he is the Director of the Private Label Development & Innovation Program; Professor of Retail and Distribution Food & Wine in the Food and Wine track of the Global MBA; Professor of Economics & Management for Food & Wine within the Professional Masters in Gestione d’Impresa, track Food & Wine.
Let’s talk about food marketing: starting from your deep knowledge of the sector, what do you think are the distinctive characteristics of this marketing decline?
The food & beverage industry offers an exceptional full immersion into the world of marketing because it is a very competitive context in which we have so many brands and channels of both sales and distribution.
In addition, there is a very relevant aspect to put alongside the study of the often ordinary, low unit price, repeat purchase product: when we talk about food we are dealing with essential goods that interact a lot with the emotional dimension. We talk about taste and smell, pleasure and memory. These are all things that are processed by marketing and open up stimulating and exciting pathways.
Several disciplines come into play: trade marketing, retail marketing, and digital marketing, to name a few.
On the one hand price, on the other responsibility, and respect for animals and nature. How to ensure that these two trends do not generate conflict?
That’s really the job of a good marketing manager: you have to find a balance point. There is a motto that says “price is what you pay, value is what you get.” Perceived value changes a lot about even intangible attributes, such as being able to claim a sustainable and organic supply chain, which becomes critical to the consumer.
An exciting and fairly recent experiment is the concept of dynamic pricing, or varying the price of the same product through time. The idea is not new; however, other strategies are also being used today: for example, varying prices according to time of day, based on audience and demand. This is a delicate aspect that, managed with transparency toward the buyer, can offer opportunities. In the restaurant industry, for example, happy hour bars are also being segmented in price according to parameters that until recently were not taken into consideration.
Another fascinating new frontier in the world of Food & Wine is personalization increasingly practicable and easily enjoyed by customers thanks to technology. For example: a customer with his or her smartphone, allowing himself or herself to be intercepted inside the supermarket by internal sensors, can receive personalized messages and benefits (discounts, product trials, etc.) based on the history of previous purchases (basket analysis). Another example is interactive electronic labels with the smartphone to provide additional information, such as matching or diets, than what is on the package. All of this can reward the customer on products that we already know are preferred; on those that they do not know or do not buy instead, we can incentivize trial.
This will be the fascinating frontier of food and beverage marketing and purchasing and consumption, yet to be explored even with the advent of artificial intelligence for the next decade.
How does the food and wine industry relate to online retail?
The sales share of the online grocery channel in Italy is still limited to 3% of the market, although steadily growing, compared to 15% in Britain or 12% in France. This is due more to the delay in development both in terms of the number of active companies, service and territorial coverage, than to shoppers’ habits. One limitation is structural: the population of our country is distributed in many small and medium-sized centers and poorly concentrated in large urban areas where these services can be efficient. In Italy, the click & collect formula (online order and in-store pickup of groceries) is still very limited, while in France it is the highest: it solves the problem of being at home at the time of delivery, does not involve delivery costs, and can be convenient for stores that are on the customer’s home-work route.
Then there are other barriers: the cost of delivery, the boring shopping experience, and much less attractive food than the physical shopping experience.
Today, online-only retailers, the so-called “pure players,” who do not already have physical stores – Amazon Fresh is the only big name in the industry in Italy – are struggling because they do not have a connection to the physical experience and branding not only of products but also of the shopping experience. The online market in Italy is dominated by players who have their stores well established. Esselunga was the first and still leads the market with a share of online sales reaching 50% in the recent past. Today it is joined by other large players such as COOP and only recently Conad. The market is set to expand, and perhaps in a few years, with virtual and augmented reality we will be able to bring the online shopping experience closer to that of a trip to the mall in the food and beverage sector as well.
Wine categories have a more distinct and well-characterized identity. Online wine has a much more fruitful life, with dedicated and specialized channels, often positioned on a higher specialization with medium to high prices and an important export gateway.
What, if any, is the direction in which marketing in the agribusiness world is moving?
Branding goes beyond the product, it creates identity for companies, and good marketing brings brands a strong identity that generates engagement and loyalty.
From the pandemic, the brand concept developed since the 1950s appears somewhat obsolete and highly oriented to the emotional dimension conveyed through traditional media.
Today there is the opposite trend: a perhaps more rational positioning designed for disenchanted consumers, capable of informing themselves, has relaunched models that just a short time ago seemed “old” but are now successful, such as discount stores and private labels that are helping to rewrite brand paradigms in FMCG.
The creation of brand identity is linked to a more sophisticated target of consumers, often young and best managed by equally young startups that are oriented to a new paradigm in which sustainability and personalized wellness topics are at top priority.
In the classroom, in the Master in which I teach, we see these steps directly with the managers of the companies involved in the students’ teamwork. We get into the dynamics of analysis-evaluation-decision-making in the form of role-plays actually very close to the reality proposed and experienced by the managers. It happens that managers are sometimes amazed by the insights and analyses proposed by Team Work, because they catch points of view that often, in business dynamics, do not emerge sufficiently, or are not among the usual business practices, or even because they move in directions not considered. This, too, is doing good marketing: incorporating models of innovation and letting other realities infiltrate and contaminate them.
In the food and beverage sector, we have a key advantage: the ability to do a deep analysis of the store or restaurant. In addition to big data, which is widely available, the store is an open book, an exclusive point of observation from which to extrapolate, with a little skill and training, a range of information that is often unreadable among the vast masses of data and on which to build strategies that are always up-to-date and innovative.
Students, thus, have access to very practical knowledge that brings them immediately into contact with companies and opens access to the business world.
What are the main challenges facing agribusiness management today?
Challenges faced with commitment and passion most often generate gratification and satisfaction. Agrifood supply chains are in a state of great transformation, and the main challenge is to manage change and innovation through fruitful and permanent collaboration among professionals throughout the supply chain. It has to be like a working style. Whether the actors in the supply chain are producers of raw materials, packaging, distributors, processors or retailers let us always remember that among the Sustainable Development Goals of the Nations the last, but not least, perhaps most “methodological,” is on partnership and innovation between companies, then between people in the supply chain. The most difficult and central challenge is to realize the goals of one’s own company, contextually with the goals of others in the three dimensions of economic, environmental and social sustainability.
The problem, in the industry, is not at the end of the process: food waste occurs throughout the supply chain. Ditto for CO2 production.
The Ellen McArthur Foundation, to give an example, has created a project on regeneration and circularity, The Big Food Redesign, based on the goal of converting supply chain models: by integrating farms, producers, and all the actors in the industry, into a more efficient, circular model can be designed.
Today we have products, such as some cookies, that come from the processing waste of other productions. They are safe, and with excellent nutritional values. Just add a little extra cocoa and you have a great-tasting cookie that is also a regenerated product with a very low impact.
It is clear that no matter how hard any company tries to reduce emissions and improve sustainability, if it remains isolated it has little effect. Here, more than elsewhere, unity is strength.
Large–scale retail influences the industry a lot. How does marketing interface with this evidence?
Trade marketing not surprisingly is becoming increasingly important: if I do not break the barrier of accessibility to the product by buyers and consumers, any work becomes useless.
We have crowded competition, racing, and average consumption that is stable and tends to decline, even if only because of low birth rates: in this scenario, trade marketing becomes crucial.
Moreover, new marketing opportunities are emerging that were previously unexplored: Tesco in the UK has just purchased 60000 screens to place in its stores. It means advertising for one’s own products or generating revenue by advertising others in the physical place of sale: plans are mixed the marketing manager today must be ready for changes in scenario and, above all, in approach. New issues mean new opportunities.
In conclusion: today many business schools offer Masters dedicated to the food world. Why come to BBS?
For Bologna: you can live well, eat well, and party. Why not come here for a year to study while also gaining professional experience?
Joking aside, that Bologna is part of the Food Valley is a self-evident argument, less well known, however, is that here there are not only great agri-food productions known all over the world (Parmigiano Reggiano, Prosciutto di Parma, Balsamic Vinegar of Modena and so on), but many excellences of minor industries that are “side business” of the industry. In a continuous head-to-head, Italian and German packaging and mechanical companies lead the world’s markets in these sectors.
Then, Bologna is the city with some of the main national headquarters of large retailers and innovative food service brands: this is a key element of direct knowledge of the world that develops around the Food & Wine industry.
Again, Bologna is the European headquarters of the climate data collection and processing presidium and the development of powerful and sophisticated processing and computing systems that have a great impact on the evolution of food supply chains and marketing. BBS is at the forefront of initiatives and innovations in these directions applied also to Food & Beverage.
Finally, a mix of professors from academic backgrounds and lecturers who come from the business world guarantees qualified and concrete knowledge in dialogue with the needs of the market that becomes immediately expendable, a true open door to the business world.
